How Ola Cabs and Uber use customer referral programs to fuel their growth

If you think of some of the hottest and fastest growing startups of today’s world, ride-hailing apps Uber and Ola Cabs will probably feature in the top of your list.

One would think they employ some super modern techniques to grow their user base given how tech-savvy they must be. However, you would be surprised to know that even these hyper-fast growing startups rely on time-tested age old techniques like Customer Referral Marketing Programs to fuel their growth.

I don’t claim these companies grow at the rapid pace just because of referral programs, but customer referrals surely play a significant role in their marketing playbook.

Why is that so? What makes their referral marketing program so successful?

Ola Cabs Customer Referral Marketing Program

Ola Cabs was started in 2010 by Bhavish Aggarwal and Ankit Bhati to help commuters deal with Mumbai’s traffic woes. Mumbai is a super crowded city and what Ola Cabs offered was an easy and affordable option for riders going from point A to point B. The company has raised huge sums of money from Venture Capital firms and is India’s largest cab hailing service by volume of bookings as of today.

How Ola’s Referral Program Works:

Each user gets a unique 6 digit alphanumeric referral code which he or she can share with friends via Whatsapp, Facebook Messenger, SMS or Email. The friend then uses the referral code to sign up for Ola Cabs on the mobile app. This triggers a special offer, usually a Free Ride for the new user immediately and Rs. 100 or Rs. 200 voucher for the referrer when the friend takes their first ride. The actual award amount keeps changing from time to time based on the company’s promotional policies and programs.

Why it works well

It’s simple to understand. Keeping referral awards simple can go a long way in ensuring success.

It’s two sided, both the friend and the referrer get awards which they value. The award mechanism is straightforward and easy to grasp.

Indian’s love free (well actually not just Indians, who doesn’t love free?). Giving your friend a free ride just for trying out Ola Cabs for the first time is a no brainer and is bound to succeed.

The award mechanism is automated and the user doesn’t need to jump through hoops to get their awards. They simply go about doing their business of booking the cabs and taking rides, and they get awarded as part of it.

Results

Ola Cabs has been a great success story by all standards. It’s valued at over $5B today. Some stats to ponder:

Ola’s Android mobile app has been downloaded more than twice as many times as that of river Uber (more on Uber below) as per a survey by WhichApp.

While the exact impact of the Referral Program on Ola’s success so far is not easily quantified with publicly available data, it’s safe to assume that the referral program has been a major contributing factor.

Uber’s Customer Referral Marketing Program

Uber entered India in 2013, much after Ola Cabs, but has been a major contender in the taxi cab hailing service battle. That’s not surprising given their $62.5b valuation, they are not a lightweight by any means. Uber has spread like wildfire globally and they have developed a cult-like following due to their seamless tech-enabled experience which customers just love.

How Uber’s referral program works

In a similar fashion to the Ola Cabs referral program we examined earlier, Uber gives its users a simple alphanumeric code (consists n number of digits) which they can share with friends and family who have never used the service before. Friends get free rides for the first time only by using the referral code and referrers get cash incentives (typically Rs. 100 to Rs. 200) for each of their referred friend that successfully converts into an Uber customer.

“We’ve found that our growth is driven substantially by word of mouth. When someone sees the ease of use, the fact that they press a button on their phone and in under 5 minutes a car appears, they inevitably become a brand advocate.”: Max Crowley, Uber Chicago (Source).

Why it works well

2 sided incentive structure so both you and your friend get great benefits for referring Uber. This type of a scheme completely eliminates any hurdle in the customer’s mind in making the referral.

A cult like following among users causes tons of natural word of mouth advertising. People love to tell each other that they use Uber as it’s so simple to use. A couple of taps on the app and your cab is on its way.

Completely automated award mechanism makes it easy for customers. No one likes to work hard to get these little incentives, so Uber makes it super simple to get free rides via referrals.

Results

Uber has over 250,000 driver partners on their platform and is present in 30+ cities across India

Uber is present in 300+ cities worldwide

A parting note on customer referral marketing programs

While it may appear from the outside that referral programs just “magically work”, that’s not the case in reality. The core ingredient to successful referral marketing programs is the fact that the product or service itself is high quality and people love it. If people didn’t find value in the service itself, they will not refer anyone else, no matter how attractive the referral benefits are.

In the case of Uber and Ola, users love their service for the fact that they solve a major pain point for them. In addition, both of these services run regular promotions by tying up with interesting restaurants, bars, music events and more to keep things interesting for users. These activities make it worthwhile for users to stay connected with these services. This in turn leads to brand loyalty and hence the referral successes.